2012 commenced on a positive note for Ireland, with news that the State is due to cut its deficit to 10.0 per cent, bettering the troika’s 10.6 per cent target.  A 1.8 per cent fall in GDP since 2010, though, suggests that the overall economic situation is still fragile.

Preliminary CSO statistics show a 9 per cent increase in exports of goods (unadjusted) between November 2010 and November 2011.  During January-October 2011, Ireland had the joint second largest trade surplus in the EU, after Germany, and generated €77 billion of merchandise exports.  This included:

• €22.1 billion for medical and pharmaceutical products;
• €17.3 billion for organic chemicals;
• €9.1 billion for machinery and transport equipment; and
• €6.5 billion in food and live animals.

The European Union was the dominant market (57.8 per cent and €44.5 billion), comprising the rest of the euro zone (39 per cent) and Britain (13.8 per cent).  The USA’s share is 23 per cent and €17.7 billion.

Belgium is the largest national market in the EU: 14.9 per cent of all goods exports, mainly pharmaceuticals.  This is followed by Germany (6.9 per cent) and France (5.4 per cent).

Export balance

Goods exports outside the USA and EU are small in comparison (€14.7 billion), hence the Government’s regular trade missions.  Compared to 2010, steady increases were recorded for India, Japan and Brazil but the value from sales to China fell by €96.9 million.  The same trends are reflected in the Irish Exporters Association (IEA) 2011 review, which put the full year’s value for goods exports at €92.5 billion.  Final CSO figures are not yet available.

According to the IEA, the overall exports total (including €78.7 billion in services) stood at €171 billion, a 4.9 per cent annual increase.  The UK and Germany were the two largest services markets: 18 per cent and 10 per cent respectively.  Computer services (€31.6 billion) and business services (€22.4 billion) were the two largest sectors. However, the association warned that exports “slowed down substantially” in the second half of the year and the outlook for 2012 was one of “sluggish growth” (3 per cent) due to contracting European demand.

“Steps must be taken to support those companies looking to target markets in the rapidly growing economies in Asia, [the] Middle East and Africa, particularly small and medium businesses, who must be supported to take risks and seek out new markets,” IEA Chief Executive John Whelan said.
Agriculture is the best good news story in Irish business: growing in value from €4.72 billion in 2009 to €5.33 billion in 2010 and €6.19 billion last year.  That exceeds the previous peak of €5.81 billion in 2008.  Livestock has always been the leading sub-sector but the main driver now is the rising price of milk.

Enterprise Ireland’s annual review tells two main economic stories: record exports and stabilised employment in Irish exporting companies.  Both reveal a new confidence in its client companies, which employed 162,692 staff last year.

“A key priority of industrial development policy is to encourage more companies to diversify either through innovation into new products, new services, new processes or into new markets,” InterTradeIreland Policy and Strategy Director Aidan Gough told eolas.  He also saw the cost base as an important challenge to overcome.  The National Competitiveness Council is calling for the faster revaluation of commercial rates, a broader tax base, and a periodic survey of credit supply and demand.

FDI success

The IDA’s end-of-year statement recorded 13,068 new jobs from foreign direct investment (FDI) in 2011, compared to 10,897 in 2010.  A total of 6,950 jobs were lost, down from 9,635 in the previous year.

Achievements included 148 new investments across all sectors, with 61 from first time investors.  Among existing clients’ projects, 46 were expansions and 41 involved research, development and innovation.

Major manufacturing investments included Intel’s ongoing factory upgrade in County Kildare ($500 million and 200 new jobs), Coca Cola’s new plant and innovation centre in Wexford ($300 million and 100 new jobs), and a $17 million expansion by automotive firm Valeo in Tuam, creating 100 jobs.
“Undoubtedly,” the report reflects, “the global economy and in particular the European economy, which is the primary target market for FDI clients in Ireland, is in a low growth phase.”  ICT, international financial services, digital media and business services are still seen as “strong” sources of investment.

Lack of investment outside greater Dublin and Cork, and an overdependence on American corporations, are two clear areas of weakness in FDI.  Clustering helps innovation and economies of scale, but hinders the west, where emigration is most acute.  Continuing departures, of whole families in some cases, damage the island’s image abroad and recall the hardest times in Irish economic history.

Enterprise Minister Richard Bruton described the FDI outturn as a “very significant achievement at a very difficult time in the employment market.”

Domestic picture

The consumer price index rose by 2.6 per cent in 2011, after two consecutive years of deflation.  When December 2011 is compared with December 2010, the largest percentage increases were:

• education (+8.9);
• household costs (+8.4);
• miscellaneous goods and services (+5.5); and
• health (+2.6).

In the latest monthly trend (i.e. the change between November and December 2011), household costs were down 1.4 per cent due to lower mortgage interest payments.  Clothing and footwear prices also decreased by 1.1 per cent, and transport costs were down 0.3 per cent due to price reductions for second-hand cars and petrol.

The number of new private cars licensed in December fell from 647 to 597 between 2010 and the same month last year (a 7.7 per cent decrease).  However, the overall number of new cars in 2011 was up 2.4 per cent on 2010, increasing from 84,907 to 86,932.  Year-on-year deceases were recorded in each of the last six months of 2011, due to the end of the scrappage incentive.

Domestic consumer demand remains slack.  The retail sales value index figure for November 2011 was 88.2 (based on 100 in 2005). 
Irish unemployment in December (14.5 per cent) remained the fifth highest in the EU, but below that of Latvia (14.8), Lithuania (15.3), Greece (19.2) and Spain (22.9).  The euro zone rate was 10.4 per cent while the overall EU rate stood at 9.9 per cent.

Depending on the outcome of the euro crisis, Ireland has four main currency options. It could stay in the economic and monetary union, quit the euro and establish an independent currency, or quit the euro and establish a currency linked to sterling or several currencies.

Staying in the euro is seen by many economists as beneficial because it provides Ireland with currency stability, lower business costs and cheaper borrowing (through lower interest rates).

Commentators say the case for remaining in the euro is compelling because of the consequences of leaving. If Ireland left the euro and reverted to the punt, having a devalued currency but with euro-denominated debt would mean greater debt in euro terms. The country would have difficulties borrowing after a likely debt default (even if this does reduce national debt).

Sizeable outflows of deposits from Irish banks would be likely, in turn exacerbating the banking system’s problems. Interest rates would rise to attract funds into Ireland, but this would adversely affect mortgage holders. While exports might be boosted by trading in a weaker currency, trade with euro zone countries is easier at present than might be the case (particularly for small businesses, which would have to deal in multiple currencies).

A new currency

For University of Limerick economics lecturer Dr Stephen Kinsella, “the introduction of a new currency would mean an immediate depreciation of that currency, implying our debt loads would probably double.” It is likely, he told eolas, that Ireland would default, resulting in “a collapse in living standards of more or less the entire population as pensions, pay, social welfare and consumer spending all drop.”

The option of adopting a new currency and paying off all national debts is “completely unmanageable”. With the ‘real’ price of euro denominated debt probably doubling, Ireland would be insolvent for a decade or longer. This in turn would lead to the default that had been avoided.

Some of the main arguments made for leaving the euro to establish a new punt centre on competitiveness, debt reduction and economic planning. Establishing a new Irish punt, devalued relative to the euro, would strengthen competitiveness. With its own currency, the Government might be in a stronger position to default or restructure some of the national debt (general government debt was estimated at 107 per cent of GDP in 2011).
Fiscal, economic and monetary autonomy would enable Ireland to implement economic policies that are conducive to its own economic cycle.

Having inappropriate interest rates can overheat or inhibit an economy, depending on the phase of an economic cycle. Ireland cannot set its own interest rates. An inappropriate currency value can reduce competitiveness. The ECB sets interest rates therefore euro zone interest rates and euro exchange rates are designed to suit the euro-area, not Ireland specifically. For a small open economy like Ireland these are significant factors. Another benefit highlighted is that trade done by Irish businesses abroad would be more valuable when overseas’ currencies are traded back into Irish currency.

The sterling option

A variation on a new Irish currency would be one linked to sterling. This would involve the punt’s value tied to sterling and interest rates tracking those set by the Bank of England. This has several advantages. Ireland’s economic cycle is similar to that in the UK, so having the same interest rates would be beneficial. It trades considerably with the UK and many retail distribution markets would welcome the move. The established value between sterling and the euro would facilitate an easier redenomination of contracts.

Sterling’s stability would be preferable to a new, independent currency subject to the volatility of the currency market. 

A third non-euro option is an Irish currency pegged to a weighted basket of currencies, as was discussed during the 1993 currency crisis. The basket of currencies consisted primarily of sterling and the deutschmark. Under a scenario with a 0.5 weighting given to the deutschmark and 0.5 given to sterling, if sterling depreciated against the deutschmark by 10 per cent, then rather than the punt appreciating against sterling by 10 per cent under the deutschmark peg it would have appreciated by a smaller amount (5 per cent). This would have led to the Irish punt depreciating against the deutschmark by 5 per cent.

This scenario was viewed as an advantage at the time, according to University College Cork academic Dr Ella Kavanagh, because “it would reduce the negative effects of sterling depreciations on short run Irish competitiveness relative to if the Irish pound was pegged to the deutschmark.” This arrangement was considered more credible on financial markets relative to a peg to the deutschmark only, if sterling was depreciating against the deutschmark.

“On the inflation side,” she added, “it was considered better than a sterling peg in terms of inflation although inferior to a deutschmark peg.”  

The disadvantages of reverting to an Irish punt (linked to other currencies or not) include the possible consequences of leaving the euro mentioned above. Lone currencies are believed to be more susceptible to currency speculators and volatile markets.  The sterling option is tempered by evidence that a new punt would have a higher value than sterling. Analysis by Bank of America Merrill Lynch’s Richard Cochinos and David Grad in November 2011 showed Ireland to be one of few euro zone countries (with Germany and the Netherlands) to have a competitive advantage over the US at current exchange rates. If so, Ireland does not need to devalue, nor would a new punt depreciate.

In the debate on currency, Ireland’s fiscal and monetary options are sometimes framed in terms of the Argentinian and Icelandic experiences. Both countries, with their own currencies, defaulted on debt and soon recovered economically. However, the comparison is limited.

“No example that includes a country with its own monetary policy is quite right for Ireland,” says Kinsella. “We don’t have one. If we did things would be much easier.” He says that we should look to Hungary (which is bound by the EU Growth and Stability Pact convergence rules but currently negotiating an EU-IMF bailout), or Portugal in six months time (which is in the euro and receiving an EU-IMF bailout) “when they burn their bondholders”.

For Kavanagh, the Argentinian and Icelandic lessons are that to avoid crises there is a need to “co-ordinate fiscal policy with monetary policy and with financial regulation.” She adds: “They are not independent.”

Irish currency options

• remain in the euro
• a new Irish punt
• a new Irish punt linked to sterling
• a new Irish punt pegged to a weighted basket of currencies

The causes of the Great Recession risk being repeated, Patrick Love contends, as he reviews the downturn. Globalisation multiplies the effect of new shocks in a way never seen previously.

Financial crises and recessions are nothing unusual. There were 195 stock market crashes and 84 depressions between 1860 and 2006. However, the 2007 crisis marks a turning point in that for the first time the entire world was affected. The trigger was the collapse of Lehmans, which called into question one of the unspoken assumptions of global finance: some banks are too big to fail. This assumption was based on a double guarantee. First, big banks had enough assets to cover potential losses. Second, if not, the government would step in. Both guarantees proved to be worthless for Lehman’s, but when the entire financial system threatened to implode, states acted quickly to restore the second guarantee. 

Governments committed $11.4 trillion to saving the system, the equivalent of the 2007 GDP of Japan, the UK, Germany and France combined. That represents a worst case scenario, and includes guarantees that may never be called on or the cost of purchasing assets and equity, whose value may go up. Supporting the banks is a work in progress, so the final cost won’t be known for years. What is certain, is that the initial crisis led to the sovereign debt crisis we’re seeing now. And in addition to shorter term concerns, the legacy of sovereign debt could interact with increased pressures on public finances caused by population ageing.

At the other end of the age scale, there are fears that the crisis could create a ‘lost generation’ of alienated, marginalised young people, given how long it usually takes employment to get back to pre-recession levels. For example, it took the US job market seven years to recover from the previous recession.

Even lost generation scenarios assume that the recovery will be relatively long lasting, and the social unrest and other consequences of frustrated hopes will be relatively circumscribed. But ‘Make Markets be Markets’, by (among others) Robert Johnson of the UN Commission on Financial Reforms, argues that the economic system is in the grip of a “doom cycle”: banks behave recklessly during the boom, confident in the knowledge that during the bust the state will clean up.

Although sound corporate governance and a strong risk management culture should enable banks to avoid excess leverage and risk taking, there will always be players eager to push complex products and trading beyond the needs of the real economy. Indeed, such activity is once again driving the rapid profit growth of some banks, with little learned from the past.

Critical links

The crisis shows how some aspects of the world economy can be both positive and negative, notably interconnectedness. Global linkages help the world to grow richer, but they also facilitate the spread of shocks. Securitisation for instance distributed risk across a larger number of players, with two major consequences. First, it increased interconnectedness among financial institutions themselves, and of these institutions across countries. Second, it gave the impression that risk had diminished. It hadn’t, but individual shares in the risk and responsibility for managing it had become diffuse, creating a false sense of security.

The financial crisis spread rapidly to the real economy, with stock market collapses, decreases in business and consumer confidence, a credit crunch, a sudden contraction in international trade, and a sharp drop in investment.

However, the BRICs (Brazil, India, China, Russia) fared better than most. Their emergence as new global players will transform the geopolitical landscape, with impacts potentially as dramatic as the decline of the European empires and the rise of the United States. How they exercise their growing power and whether they relate co-operatively or competitively to other powers in the international system are key uncertainties.
The one major certainty is that there will be other shocks, with three characteristics. The fact that a few people such as financial market traders can provoke major disruptions reveals an aspect of today’s global socio-economic system that will grow in importance: asymmetry. Another example would be the panic caused by the fear of a small country like Greece defaulting on its debt. The reason is that the interconnectedness mentioned earlier can amplify relatively small, local problems (such as sub-prime mortgages) into systemic risks.

In addition to asymmetry and amplification, a third ‘A’ is likely to become more important: asynchronicity, for example lags between economic activity and commodity prices or decoupling of countries from swings in the global economy. Asynchronicity undermines the case for global solutions to a number of problems.

The Great Recession was due to the unravelling of tensions in the system. These tensions were not reduced thanks to any government policy, but built up until they exploded into a systemic shock that caused misery for billions of people and would have destroyed the financial system if states hadn’t pumped trillions of dollars into the economy. Is pay up and hope things improve the best we can do?

Profile: Patrick Love
Patrick Love is Senior Editor with OECD Publishing and the author or co-author of five books in the OECD Insights series, including one on international trade and one on the economic crisis.  He is currently working on the OECD Green Growth Strategy and the OECD project on future global shocks. Patrick blogs at www.oecdinsights.org

Figures from the arts, politics, business and the media share their thoughts on the way ahead in 2012.

Brendan Keenan
Economics editor, Irish Independent
It looks as if 2012 will be another year of stagnation for the Irish economy. The endless euro zone crisis has dashed hopes that the year might have seen the start of recovery from the deep, four-year recession.  Most analysts expect the volume of goods and services produced this year to increase by only half a per cent or so. When the large profits earned by foreign companies are deducted, national income may fall again, leaving it some 13 per cent lower than in 2007.

The problems in the euro area may depress demand for Irish exports: the only source of growth in the Irish economy. It raises fears among consumers that the Government will miss its 2012 budget targets and impose further tax rises and spending cuts to compensate.  The best one can hope for is that 2012 will be the opposite of last year, when the economy performed well in the first half and then disappointed. It will certainly be weak in the next six months but better news from abroad might just provoke a pleasant surprise in the second half.

Kevin Allen
Actor and film director
I think it’s taken a couple of years for the realities of the economic scandal to sink in with artists of every flavour.  In terms of what I do, it’s taken some serious adjustment to replace my bread and butter income stream of screenplay commissions and film development, but although tough, this painful shift naturally induces an edgier creative environment. Good art has always come out of adversity and struggle, so I think we’ll see some interesting, unorthodox ways of getting small, original films to new markets. And that just has to be good on the back of the rather bland gravy train that chugged along for so long.

Denis Naughten TD
Independent
Roscommon-South Leitrim
I believe that 2012 is the year that Irish people will break the chains of doom and depression and instead look to themselves for individual and societal solutions to the economic mess.   Attending the BT Young Scientist competition recently highlighted the huge potential that our future holds. We, the older generation, need to hold it together for them.

And we can. Our agri-food sector is thriving with huge potential growth in premium food markets like Germany.   The job announcement by botox manufacturer Allergan is only one of many announcements to come in the thriving pharmaceutical sector. And our Irish-trained researchers are rapidly developing new fields which will bring our pharmaceutical and agri-food sectors together, with potentially even greater spin-off.
And under the radar, our indigenous software sector is creating tens of jobs in a sector that can become a major economic pillar for Ireland in the not too distant future. As a people we are inquisitive, we look for solutions and I believe we can use this to our own advantage, if we start to look within.

Patricia Callan
Director, Small Firms Association
The SFA’s Investment Report confirms that growth is slowly returning, with over half of small firms expecting increased turnover in 2012, driven by the development of new products and services, increasing export sales and somewhat surprisingly, increasing domestic sales, even though the domestic market remains fragile.

Employment in small business is also expected to improve, with 34 per cent of firms planning to increase headcount and 50 per cent expecting to maintain current employment levels for 2012. Employment growth is expected to be focused on engineers and technicians, sales and marketing and manual operatives.  We estimate that 12,000 new businesses will be set up this year. 

Michael McGrath TD
Fianna Fáil, Cork South Central
Ireland has reached a key stage in its recovery from the unprecedented economic crisis that has been ongoing since 2008. An anticipated outturn in 2011 of modest economic growth based on a rise in net exports and a current account surplus represent welcome developments. While the challenges facing the euro zone will continue to command attention, the key policy challenge for Ireland in 2012 will be boosting consumer confidence and stimulating domestic demand.  Innovative policy measures that encourage investment in infrastructure and labour-intensive areas can create a significant number of jobs and boost the overall economy and should be a priority for the Government.

Fergal O’Brien
Chief Economist, Irish Business and Employers Confederation
Following a promising first half of 2011, economic growth weakened again in the third quarter. The UK and euro zone economies have slowed sharply resulting in softer export growth and the euro zone crisis is a further weight on Irish consumer confidence. The outlook for the US economy and emerging markets is more favourable and Irish exports will achieve another record performance in 2012 but the pace of growth will be slower. A major silver lining for Ireland in the euro zone crisis is the sharp fall in the euro which will give a substantial boost to the value of Irish exports.

Brian Dowling
RTÉ political reporter
Trying to compress a view on the challenges that lie ahead for 2012 within 100 words may seem a challenge in itself!  But, for the most, the biggest challenge for Ireland can be summed up in one word: euro.  The economic and financial fate of the country hangs on the future of the currency and the political fortunes of the Government are also inextricably linked with what happens to the single currency.  The euro aside, one of the major political hurdles for the Government, will be the children’s rights referendum, especially after the defeat of the Oireachtas inquiries referendum.

Dermot McLaughlin
Chief Executive
Temple Bar Cultural Trust
2012 will be tough.  People in Temple Bar are a resilient, determined community. Our company is 21 years old this year. Our main customers are commercial retail tenants, and cultural and arts organisations. It’s another very hard year for retail; this will create pressure on us.  Public funding for culture and arts will contract but I expect a robust response from the creative economy in Temple Bar. That said, the Temple Bar regeneration remains a success story economically, culturally, socially and as a tourism destination. We need to nourish our close relationship with Europe: the regeneration of Temple Bar is an example of Ireland and Europe getting it together, and getting it right!

A poll on a fiscal treaty would be the ninth EU-related referendum in Ireland. Stephen Dineen looks at the electorate’s track record.

The Government’s reluctance to hold a referendum on an EU fiscal compact is not surprising. Regardless of the amount of time, energy and cost involved, Ireland’s relationship with the EU at the polling booth has become complicated.

UCD political scientist Professor Richard Sinnott, an expert on Ireland’s voting behaviour in EU referendums, told eolas he believes any forthcoming EU referendum will differ from previous ones. The Irish referendum experience has been one of a country being the recipient of EU largesse “whereas in the upcoming one Ireland will be a recipient, or certainly be seen by some voters and campaigners, as a recipient of pain rather than largesse.” This will make it more difficult for the Government to win, “but it will also simplify the issues, because I think the issues will focus around that particular problem.”

Ireland’s early EU-related referendums were passed with strong majorities. Accession to the European Community was ratified 83:17 in 1972, and referendums on both the Single European Act (1987) and the Maastricht Treaty (1992) were passed comfortably. The Amsterdam Treaty referendum, held in 1998, was the first time that less than two-thirds of voters endorsed EU treaty change.

The political establishment was stunned in 2001 when the Nice Treaty was rejected. On a turnout of 35 per cent, the ‘No’ side had a majority of 76,000 votes (54:46). Research conducted after the referendum showed that the ‘No’ side won in part because of the low turnout and not any major shift in opinion about Ireland’s place in the EU. The anti-treaty camp included those dissatisfied with the EU policy-making processes, supportive of strengthening Irish neutrality and opposed to enlargement. Some voters were mobilised to choose on the basis of perceived implications for divisive policies such as abortion, with the ‘No’ side benefiting most. Older people and women were more likely to vote ‘No’. Late decision-making, particularly among eventual ‘No’ voters, was also a feature.

When the referendum was re-run in 2002, a large majority accepted the treaty (63:37). Despite a turnout of less than 50 per cent, the increase from 35 per cent to 49 per cent was explained, according to subsequent analysis, by greater enthusiasm for integration. The generational and gender effects on voting were absent and there was increased understanding of the treaty. The number of voters who claimed to have understood at least some of the issues involved rose from 36 per cent in 2001 to 61 per cent in 2002.

The Lisbon Treaty was the second treaty to be rejected, with 53 per cent voting ‘No’ in June 2008 on a turnout of 53 per cent (significantly higher than the first Nice Treaty referendum). Analysis of the result conducted for the Department of Foreign Affairs (by academics Sinnott, Elkink, O’Rourke and McBride) found that the outcome was determined by overall attitudes to EU integration, knowledge levels regarding the EU, incorrect perceptions of the treaty’s contents (about conscription, abortion and control of the corporation tax rate), disapproval of the loss of a permanent Commissioner, and domestic political factors.

Many who abstained cited low levels of understanding or lack of information, while the ‘No’ vote was composed of those with concerns about the EU’s position on wage rates, low levels of knowledge about the treaty, people opposed to the scope of EU decision-making and a rotating commissionership. The higher a person’s labour skill set, the less likely they were to vote ‘No’. People with more positive attitudes towards the EU voted ‘Yes’. Analysis also showed that satisfaction with the Government is neither necessary nor sufficient for winning such a poll.

Fifty-nine per cent of the electorate voted in October 2009 in the second Lisbon Treaty referendum, in a very different campaign. The ‘Yes’ camp retained nearly all its voters from the first vote, a quarter of previous ‘No’ voters switched and one-sixth of those who had abstained in 2008 voted ‘Yes’. The extensive unpopularity of the then government had only a limited effect.

Among those who were more likely to vote ‘Yes’ were those in upper middle class occupations, while the ‘No’ vote was characterised by those in lower middle class, skilled and unskilled working class occupations and small farmers. Sinnott and Johan A Elkink found that the outcome boiled down to people’s attitude on whether Irish membership of the EU was a good thing and whether a ‘Yes’ vote would result in improved economic prospects. Assurances that the country would have a permanent Commissioner and control of taxation also contributed.

Public opinion and socio-economic conditions have changed considerably since the first Nice Treaty referendum in 2001 and also the second Lisbon Treaty poll in 2009. Eurobarometer polling, which has been conducted in member states since 1973, shows public opinion towards the EU has soured in a country that has traditionally had high satisfaction levels with membership.

Trust in the EU has halved since the time Ireland accepted the Lisbon Treaty (from 47 per cent to 24 per cent), with distrust increasing from 35 per cent to 60 per cent. In November 2011, only 34 per cent of the Irish public felt that the interests of Ireland were well taken into account by the EU, with 54 per cent disagreeing. The gap between those who see the EU as a positive thing and those who see it negatively has narrowed from 46 per cent in the autumn of 2009 to 11 per cent at present (see chart).

Sinnott believes a referendum on the fiscal compact should not be held on the same day as that on children’s rights or abolition of the Seanad. He believes such polls, particularly concerning children, could become quite fraught “depending on how the sides line up and what the Government wording of the referendum is,” and the airwaves could be “taken over” by that debate.

Referendum results (%)

Ireland’s image of the EU

Ireland has had “stunning” increases in life expectancy (with the age of the total population at birth increasing from 76.6 to 80 years since 2000) but is “doing badly” at preventing and treating chronic conditions, which are largely self-inflicted through lifestyle choices. Mark Pearson brought this message to the ESRI Budget Perspectives event.

While Ireland’s health spend per capita rose quicker than the OECD average during the boom years (at a rate of 7.6 per cent rate compared to the overall OECD rate of 4 per cent), it now spends the same as the OECD average (9.6 per cent of GDP). Total expenditure in 2010 was €14.8 billion and the 2011 estimate is €14.1 billion. However, this money is not being used efficiently, Pearson warned.

“If Ireland was as efficient as the most efficient OECD countries it would spend what it currently spends and have three more years of life expectancy,” he stated.

The health expert added that an alternative would be to retain current life expectancy, spend less and become more efficient. “It’s not so easy to relate that into policies,” he conceded.

An increasingly ageing population across Europe up to 2025 is set to raise the heath spend required by 2.5 per cent of GDP, the OECD predicts.
While Ireland’s proportion of daily smokers has decreased from 45.6 per cent in the early 1970s, at 29 per cent, it is still well above the OECD average of 22.3 per cent. Ireland is fourth highest in the OECD countries (after the Czech Republic, Austria and Estonia) in terms of its alcohol consumption which stands at 11.3 litres per adult, compared to the OECD average of 9.3 litres. Obesity levels in Ireland are the same as the UK (23 per cent) which, again, is above the OECD average of 21 per cent. Growing levels of obesity and an unhealthy lifestyle “foreshadow” more chronic diseases and will lead to higher health care costs, the health analyst warned.

On the contentious issue of the closure of hospital beds, Pearson argued that if campaigners against local hospital closures really cared about the quality of service, “they’d be demonstrating insisting that their local hospital is closed down because local hospitals can’t do a lot of these complicated procedures as well as big hospitals.”

He cited data from the Netherlands on cystectomy operations which found that if a hospital does 10 or more operations per year, the mortality rate is 1.2 per cent, if it does five or more the rate is 3.6 per cent and if it does less than five per year the mortality rate increases to 6.4 per cent.
Ensuring that unnecessary hospital admissions are avoided is essential if the system is to be improved because it costs €50 to visit a GP as opposed to €1,000 to spend one night in hospital. Ireland needs to consider new ways to incentivise primary care so that chronic conditions such as diabetes do not require unplanned trips to the hospital.

Currently, Ireland pays for the amount of activity doctors do “rather than the health they deliver.” It should follow the lead of other OECD countries and experiment with pay-for-performance, Pearson suggested. For example, Germany combines rewarding doctors for health delivery with clinical guidelines.

Pearson concluded: “Basically, one reason why you are doing average in health is because the health system hasn’t tackled lifestyle issues very well.”

The ECB-EC-IMF troika was in Dublin from 10-19 January for its fifth review of the bailout programme’s implementation. It concluded that the programme is “on track” but with no room for complacency.

The 2011 general government deficit target of 10.6 per cent was not only met, but surpassed at 10.0 per cent. The two pillar banks (AIB and Bank of Ireland) met their 2011 deleveraging targets, selling €15 billion worth of assets at “at a better price than anticipated,” according to the troika. Total deleveraging across government-supported banks amounted to €40.5 billion to the end of November 2011 (the final year target was €34.7 billion). The Government is negotiating with the troika on proceeds from possible privatisation and an alternative to the €30.6 billion promissory note used to fund the Irish Bank Resolution Corporation.

Banking reforms remain central to the Government’s check-list for the first quarter of 2012. The actions required are:

• assessment of the banks’ performance in meeting agreed asset disposal targets;
• monitoring of the banks’ net stable funding and liquidity coverage ratios to ensure convergence with Basel 3 (global) standards;
• reporting on progress in reorganising Irish credit institutions and implementing the Central Bank’s action plan for strengthening supervision of institutions;
• finalisation of new retail planning guidelines, including the agreed changes to retail cap sizes;
• strengthened job activation and training policies and publication of an external evaluation of the revised national employment action plan;
• submitting a reform programme by the Department of Social Protection, targeting social support on those with lower incomes and ensuring work pays for welfare recipients, to the Government; and
• conducting a review and report about the Competition Authority’s resourcing, to see if it is adequate for enforcement of the new legislative framework (a Competition Bill is currently before the Oireachtas).

Five requirements have been given more time following the troika’s review. Publication of legislation on the personal debt regime must now happen by the end of April instead of the end of Q1. The banks’ next stress tests, due by the end of March, are now expected to be done in conjunction with EU-wide tests by the end of November. A decision on the future of Irish Life & Permanent will be made by the end of April (with recapitalisation of €4 billion completed by the end of June) having previously been due by the end of October 2011. Legislation to reform the JLC-REA system (the Industrial Relations (Amendment) (No 3) Bill 2011) will be amended to strengthen the inability to pay clause. The Fiscal Responsibility Bill, with provisions for a medium-term budgetary framework, fiscal rules and a fiscal advisory council will now be published by the end of June 2012 to await the contents of the new EU fiscal treaty.

There was a sense at the troika’s press conference of how delicately poised the programme’s success will be in 2012. It has stated that Ireland’s economic growth rate for 2012 will 0.5 per cent, while the Government has predicted it will be 1.3 per cent. The EU’s economic, fiscal and political outlook remains uncertain, and the level of austerity and banking support required remains contentious among some of the public. 

“I am not denying the social consequences of this programme [and] the difficulties involved,” the European Commission’s István Székely told reporters.

Designed to promote confidence, maturity and independent learning, transition year is an optional programme in most secondary schools, bridging the gap between the junior and senior cycles. It should be a model for the direction in which the leaving certificate must go, according to the headmaster of Belvedere College, Gerard Foley, and the head of Mount Temple Comprehensive, Liam Wegimont.

In a scathing attack on the current leaving certificate system, both principals feel that it is “redundant” and teaches pupils to memorise information that is subject to change, rather than equipping them with the skills for self-directed learning.

“When transition year is done well, that’s exactly where the Irish education system should be going,” Mr Wegimont tells eolas. “Transition year gives the space for schools to design curricula on the actual needs of the children in that school. We would see it very much as a model for future leaving cert reform,” he adds.

Mr Wegimont is looking forward to the implementation of the reformed junior cycle, which will focus on independent learning and critical thinking. “While we work very hard to prepare children to get the best points possible in the leaving cert, we are also fairly clear as a school that the leaving cert is redundant, is not fit-for-purpose and should be abandoned as quickly as possible,” he states. “It gets in the way of, rather than enabling, learning,” the headmaster emphasises.

Mr Foley agrees, saying: “Transition year is what education is about.” He believes that the current “centralised, exam-driven, controlled” system is “a nonsense.” It is “an outdated mode of working because [it doesn’t] train people with the skills they need to work in teams or to be independent lifelong learners,” he continues.

The principal laments that “IT isn’t even a leaving cert subject in Ireland” despite the Government’s claims that Ireland is attracting social media and ICT companies due to its well-educated graduates. When asked by his son about tessellations, Mr Foley “knew they were something to do with tiles.” His son’s first port of call was to use his smart phone to look up the term on Google.

Politicians who talk about education “have no idea” because they have never stood in a classroom and don’t understand “how people are learning now as opposed to how they learned when they were at school,” he contends.

“I’m in my forties and I wouldn’t dream of thinking that my experience in the 80s in a Christian Brothers in Tralee has any similarity with the way my own son learns now,” he adds.

Carpe annum

Mount Temple is a co-educational, comprehensive, non-fee paying school with a Protestant ethos. Transition year is paid for through a grant from the Department of Education, plus fundraising undertaken by the parents’ association which operates a voluntary contribution scheme. Past pupils include all four members of U2, former Irish Cricket international Patrick Hughes and author Christopher Nolan.

“We work on the Marxist principle: From each according to his ability, to each according to his need [therefore] we try to ensure that no child is excluded from an activity on the basis of not being able to pay,” Mr Wegimont explains.

Belvedere College is a fee-paying, all boy, Jesuit school, situated in the north of the city. Past pupils include former Finance Minister Brian Lenihan, rugby union’s Cian Healy, Sir Terry Wogan and James Joyce. Pupils pay €350 for transition year which covers everything apart from an exchange trip, which is paid for by families. As pupils are hosted by families linked to other Jesuit schools on the exchange programme, the major cost is the flight.

Belvedere’s transition year students begin their decision-making process in third year when they start seeking work experience and care in the community placements. Tuesdays are allocated for skills classes such as the young entrepreneurs scheme, cookery, lutherie (guitar-making), Chinese language and culture, youth leader course (with Belvedere Youth Club) and millinery. Thursdays are set aside for activities including film appreciation, martial arts, FAI coaching courses and scuba diving. The other three days are focused on leaving cert subjects.

The transition year motto is “carpe annum,” Mr Foley states. Having been used to the “memory laden” junior cycle, this will be their first opportunity to be independent. They are expected to start fundraising for their exchange trip which, depending on the subjects studied, will entail a stay in France, Germany, Spain, China, Boston, or Greece. Some students decide to partake in the Camino de Santiago Pilgrimage. “If you start transitioning in transition year, it’s too late,” Foley claims.

Students are assessed on an ongoing basis on project-based, oral and written work (such as keeping a diary of their experiences). The importance of meeting deadlines is emphasised. The total amount of points to be gained is 14,000 e.g. students are marked out of 1,000 for English and work experience and out of 750 for optional subjects such as art or Greek. A Spirit of Transition Year award is given to a student who excels in an area which is “out of their comfort zone.”

Contributing to community is an essential element of transition year for Belvedere’s pupils, with some becoming peer tutors on the social diversity programme, with pupils from more disadvantaged backgrounds.

“A kid going to school in the East Wall sees Belvedere College as a school for all the poshies from Clontarf, but he meets a kid who is helping him in a homework club and realises: ‘A kid is a kid and I’d like to go there,’” Mr Foley states.

Similarly, in Mount Temple, pupils are expected to broaden their experiences and awareness of the world. Classes include mainstream subjects such as Irish, English, maths and French or German, modules in leaving cert subjects such as physics and chemistry; and a wide range of non-exam subjects such as judo, Japanese, sound engineering, cookery and drama. Community work in Nazareth House retirement home, Sheriff Street crèche and the Central Remedial Clinic in Clontarf is voluntary and the pupils find it rewarding, according to the principal.

In addition, two activity weeks are held during the term where pupils partake in classes such as first aid, sailing, film-making and soccer skills. Actiontrack is a particular favourite for the pupils, Mr Wegimont contends. It entails a group of English troubadours (specialists in medieval music) coming into the school on a Monday morning, choosing a theme and turning it into a musical or a play by the end of the week, with the students writing and performing the music and designing the set and the lighting. A musical or play is also produced each year. The choice is “wide and broad,”  Mr Wegimont comments.

Another major element is the school’s partnership project with Ghana. “Transition year pupils have the opportunity to visit Ghana and experience the Ghanaians’ rich culture and customs first hand,” the headmaster explains. Whilst in Ghana they volunteer in projects, helping vulnerable and poor families and orphans.  “There is great excitement and anticipation amongst the TY students involved,” he comments.

The headmaster adds: “This is at the core of what transition year is about because, as a school, we are committed to education for sustainable development and global justice.”

Protection for customers of banks, insurance and investment companies, and intermediaries was strengthened in January through a revised consumer protection code. It is the first major revision of the code since it first came into effect in January 2006. The Central Bank has also increased staffing in consumer protection. The code includes several significant changes, such as:

• stricter affordability testing regarding mortgage lending, including a ban on self-certified declarations of income;
• a compulsion on lenders to come up with workable solutions for people in difficulties;
• more prescriptive customer profiling of information, such as personal circumstances and financial situation, so that institutions can assess whether a product or service is suitable for a particular consumer;
• a restriction to three times a month on how often lenders can contact borrowers in arrears (on loans such as credit cards, personal loans and buy-to-let mortgages);
• a timeframe of six months for institutions to resolve errors affecting consumers; and
• regular analysis (which the Central Bank expects done at least annually) of detailed records of complaints and errors, which must be maintained.

In the revised code, institutions are required to ensure that key information on an advertised product or service is prominent and not obscured or disguised and that “small print or footnotes are only used to supplement or elaborate on the key information in the main body of the advertisement and must be of sufficient size and prominence to be clearly legible.”

On assessing the suitability of someone for a mortgage where the interest rate is not fixed for five years or more, an institution must test whether someone can repay the instalments on the basis of a 2 per cent interest rate increase, at a minimum, above the interest rate offered.

A spokeswoman for the Central Bank told eolas that more staff have been assigned to deal with consumer protection (up from 55 at the end of 2009 to 78 at the end of 2011). These staff also work on compliance monitoring, authorisation of certain types of firms, and policy work.

She said that the revised rule regarding self-certification of income has come about “on the basis of experience and the reliance by the industry on self-certified declarations of income.”

The Irish Banking Federation’s Director of Public Affairs, Felix O’Regan, said that the banking sector will find it challenging to deal with the implementation of the consumer protection code (underway since 1 January) in parallel with other new requirements such as the business lending code, minimum competency requirements, and the new fitness and probity regime. However, the federation welcomed the six-month period allowed for system development and staff training on the new requirements. He said its member banks “are now fully committed to making the revised code work for the benefit of their customers.”

At present, the Central Bank has the power to administer sanctions, conduct inquiries and prosecute some summary offences through the courts. The new consumer protection code follows two public consultations (in 2010 and 2011). The only previous amendment to it was in May 2008 when it became applicable to retail credit and home reversion firms, which buy shares in people’s homes for a set price.

Enterprise, Jobs and Innovation Minister Richard Bruton, is planning to reform consumer law, through a new Consumer Rights Act. Bruton wants to simplify and consolidate consumer legislation, creating clearer rules for businesses and improvements for customers.

Following on from the Sales Law Review Group report (published last October), which made 124 recommendations, the Minister indicated that he will ban excessive payment fees greater than the cost of processing payments, additional charges on consumers through ‘pre-ticked boxes’ unless there is express consent, and curbs on small print through requirements such as minimum font sizes and a mandatory font colour such as black.

The Minister indicated that the ban on excessive payments fees and changes regarding pre-ticked boxes would be introduced by statutory instrument. A spokeswoman for the department said the time frame for enactment of these instruments will depend, inter alia, on what arises from a public consultation on these provisions with consumer and business interests this spring.

On the question of how a consumer might realistically be able to prove that a payment fee charge is greater than the actual cost borne by a trader, the spokeswoman said it would be dealt with in the consultation. Bruton expects to bring the heads of the proposed Consumer Rights Bill, which will overhaul the four acts and five pieces of secondary legislation relating to consumer transactions, to the Cabinet in late 2012 or early 2013. The Minister has said he wants the new Act to “create a structure that will be appropriate for the 21st century consumer market, will be simpler to understand, will create clearer rules for businesses, and will bring about substantial improvements for consumers.”

Consumer law will also change through implementation of the new EU Consumer Rights Directive, which replaces two previous directives (97/7/EC and 85/577/EEC). The Directive aims to eliminate hidden internet charges, strengthen refund rights and give consumers the right to withdraw from a distance or off-premises contract within 14 days from receipt of the goods under a contract of sale or conclusion of a contract for services. The measures that Bruton hopes to implement by statutory instrument are contained in the Directive. It was published in the EU’s Official Journal on 22 November 2011 and Ireland has two years from then to implement those measures.

In March, the CSO will begin publishing nine volumes and two profiles of census information. Stephen Dineen talks to Deirdre Cullen and Gerry Walker, two of the CSO’s senior statisticians overseeing the entire Census 2011 process.

“What’s unique about the census,” says Deirdre Cullen, “is that it hits every single person in the country.” Cullen is responsible for census recruitment, publicity and outputs. The 2011 census project began in September 2008 and will conclude with the final data publication in December 2012. Intercensal information queries are ongoing and planning is already underway for the 2016 census.

At the outset, the CSO carried out a public consultation (over 90 submissions were received) and wrote to government departments, agencies and other organisations to gauge what should be included in the census.

Previously the census used the electoral division as a basic unit for enumeration. However, household numbers vary from fifty to 35,000, therefore the CSO, in collaboration with Ordnance Survey Ireland and the National Institute for Regional and Spatial Analysis (NIRSA) in NUI Maynooth, designed a small area unit (approximately 90 households) for the 2011 census.

The recruitment process involved 15,000 job applications. All applicants were interviewed (and successful candidates signed-up) on the ground working and paid within seven weeks. “We used the people that we recruit first to interview the next layer down, so by the time we have the 440 field supervisors in place we use them to interview for the enumerator job,” says Cullen.  4,854 enumerators covered 19,760 small area units.

Several questions distinguished the 2011 form from that in 2006. Blindness and deafness were included as individual disability categories. The household occupancy and home heating questions were changed and a question on general health, used in the UK census, was added. Cullen says the question (“How is your health in general?”) has been found to be “an excellent indicator of actual health of the population.”

Before the field work, enumerators were given a 130-page manual as part of their training. “We try to cover every eventuality in that manual, so there’s no doubt or ambiguity as to how things should be done,” says Walker, who is responsible for field operation, geography and processing.
There were 10 weeks of field work, five before census night and five after. The collection process encountered difficulties such as the sensitivities of certain groups to answering particular questions (such as the question regarding the number of children born alive) and the 6,000 out of 1.8 million forms that were not filled in despite persistent calls. There was also some hostility from some households. “Particularly this time,” explains Walker, because of “all of the anti-public sector stuff in the press, our enumerators would have been knocking on doors and they would have got doors slammed in their faces.” Cullen states, however, that “by and large our experience is the Irish public are very co-operative with the census.”

The actual census forms were scanned in a processing system with up to eight stations (e.g. one for numeric questions, another for family coding) and software used to assist with problematic coding. Credibility checks were performed. “There are about 400-500 different credibility checks that we do on a census form,” explains Walker, “so we’d be looking at things like a working airline pilot that has ticked that they were blind.” The CSO operates on a general rule that data is not amended unless it’s absolutely clear to be wrong.

This year’s output design will also differ from the previous census. “We’re going to do a lot more interpretation and telling the story of the results than was done before,” explains Cullen, adding that there will be charts, maps and graphs and it will be more colourful. “The idea is to make it much more accessible to the public, much more user-friendly.” There have been over 65,000 views of the preliminary census report web page.

Whereas small population profile information was presented thematically before, 2011 information will be presented in two-page (A4) documents, with all the information on a town in a written report without tables. Working with NIRSA, the All Island Research Observatory resource will be used to display census data on maps. 

Preliminary results

Housing stock and preliminary population figures were published in June 2011. The big surprises were the higher than expected population level (90,000 more than expected), the big increase in the number of vacant dwellings (by 10.5 per cent) and that two constituencies had exceeded the population threshold of 30,000 (Laois-Offaly and Kildare South). On the higher than predicted population total (4,581,269), Cullen says: “We’ve continued to have immigration in Ireland, possibly higher than what the estimates had shown over the intercensal period.” And while “the gap isn’t quite as bad as it looks,” the CSO will now revise the population estimates (derived from the Quarterly National Household Survey) from previous years to account for the discrepancy.

A range of state agencies, interest groups and voluntary organisations will use the census data. An Garda Síochána, for example, will use it to profile the level of deprivation in areas. The private sector uses it to profile areas to make business cases for foreign direct investment, using information such as the number of graduates in an area.

As for the future format of the census, Cullen states that the role of administrative records should be examined to see “whether or not we can use it, if you like, to back-fill gaps in data.” She adds: “We certainly need to think about the internet option. We need to think about posting out and receiving data back by post.” In the UK the Office for National Statistics is considering alternatives to the traditional census for 2021.

Whilst most countries perform censuses every ten years, Ireland’s tradition of five-yearly censuses is justifiable, according to Cullen, “because of the nature of our population and how it changes,” and the speed at which it is growing.

Census information publication schedule

29 March:  Principal demographic; results volume
26 April: Population classified by area volume; geography profile
24 May: Ages profile
28 June: Principal socio-economic; results volume
26 July: Workers and employment profile
30 August: Housing profile
20 September: Households, families and marital status profile
11 October: Migration and diversity profile
1 November: Disability, carers and health profile
22 November: Education profile
13 December: Commuting profile
To be confirmed: Small area population; statistics web tables

Counting in numbers
€50 million cost
1.8 million forms
19,760 small area units
4,854 enumerators
300 tonnes of census forms